Photo credit: Rupert Ganzer
Low Inventory Continue to Hamper Affordable Home Sales
The housing market, as measured by the number of new homes coming onto the market, seems to be on a see-saw. From 2012’s and most of 2013’s plunge to the market’s surge in May, Zillow’s latest data shows inventory for all for sale housing increasing 11.8 percent year on year. Most of these gains were homes priced in the middle and top third of values. What about the highly sought after affordable homes category? First time home buyers saw decreases in inventory in 28 of the nation’s 30 largest metro areas from the year before.
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“It’s good to see overall inventory rising. It’s likely that many would be sellers have decided to capitalize on recent home value gains, particularly as the pace slows, and list their home for sale now in order to move into a new home while mortgage interest rates remain low. But persistent inventory constraints at the low end of the market continue to make it a tough environment for first time and lower income home buyers. Low inventory and high demand can lead to rapid price spikes, which make homes even more difficult to afford for many buyers. Hopefully the inventory gains we’re seeing in the middle and upper tiers of the market will begin trickling down to the most affordable homes soon”, said Zillow Chief Economist Stan Humphries.
The sluggish economy keeps a lid on many lower income first time homebuyers from buying into the middle tier of the market. There’s been an increase of well-heeled first time buyers purchasing middle and upper tier properties, where the inventory is higher.
Jeff Mezger, KB Home CEO says, “What I was trying to point out in the cities — pick a Texas city because all four of the larger cities has solid job growth and real population growth going on today. And it’s because of the job growth we are seeing more first-time buyers. They are not – it’s a well-heeled first-time buyer, but it’s not the high income first-time buyer like you would see in Orange County or up in Santa Clara County. So I think it’s because you have job growth going on in those cities and that’s within our own business we are seeing this.”
In addition to decreased inventory, lower income home buyers with traditional financing have to compete with cash buyers. According to Zillow data, in 27 of the top 30 metro areas, more than a third of all lower priced home purchases were made with cash.
Resources:
Property Wire. “More homes coming onto the market in the US, latest data shows” 3 July 2014. http://www.propertywire.com/news/north-america/us-inventory-real-estate-201407039314.html
Housing Wire. “Monday Morning Cup of Coffee: KB Home CEO nails what’s missing in housing” 29 June 2014. http://www.housingwire.com/blogs/1-rewired/post/30478-monday-morning-cup-of-coffee-kb-home-ceo-nails-whats-missing-in-housing